Form PF: Are you up to speed with the latest developments?

What are the changes?

Event-driven reporting

The event-driven reporting rules are potentially the most surprising changes and equally the hardest for advisers to prepare for. Advisers have to ensure that they have processes and systems in place that will alert them to a reportable trigger event. Large hedge fund advisers are required to make current reports with respect to qualifying hedge funds within 72 hours upon the occurrence of a trigger event, which can include the following:

⏱ Extraordinary investment losses 

⏱ Margin, collateral or equivalent increase

⏱ Notice of margin default or determination of inability to meet a call for margin, collateral or equivalents

⏱ Counterparty default

⏱ Terminated or materially restricted prime broker relationships

⏱ Operations events internally or at a service provider relating to natural disaster or other force majeure event

⏱ Redemptions and withdrawals exceeding 50% of the most recent net asset value

⏱ Inability to satisfy redemptions or suspension of redemptions 

The 72- hour period begins upon the occurrence of a current reporting event or when the adviser reasonably believes that such an event has occurred.

Similarly, there are event-driven reporting rules for private equity funds advisers. There is a requirement to report within 60 days of the quarter end for ‘private equity reporting events’ that could indicate the same type of issues. The reporting events include:

⏱ Adviser-led secondary transactions

⏱ Removal of the General Partner (GP) 

⏱ Election to terminate the investment period of the fund

⏱ Election to terminate the fund

The current reporting for private equity fund advisers is contained within section 6 of the Form PF report. 

Enhanced reporting requirements for large private equity fund advisers 

The other set of amendments that were adopted in May 2023 were in respect of large private equity advisers. This includes advisers with an excess of $2billion regulatory assets under management. The most notable changes for large private equity fund advisers are: 

• Reporting details of General Partner and Limited Partner claw backs where these are in excess of 10% of the funds aggregate capital commitments
• A new question to report the fund’s strategy as a percentage of deployed capital
• Information regarding fund-level borrowing and/or other cash financing
• Events of default – more information is required regarding the type and nature of the default event
• Change in reporting of the geographical breakdown, the new requirement will mean advisers report each country in which a fund has exposure equal or greater than 10% of the funds NAV as opposed to the static regions on the current form

The enhanced reporting amendments for large private equity advisers will become effective from 11 June 2024.

Amendments to section 3 of the Form PF report

The changes adopted in section 3 of the Form PF return are applicable to all ‘large liquidity fund advisers’. This captures liquidity fund advisers who manage more than $1billion in combined liquidity and money market assets funds. Some of the important changes are as follows:

• Advisers are required to report specific information for each investor that beneficially owns 5% or more of the fund’s equity, which will include the type of investor and the percentage of the fund’s equity owned by the investor If the adviser selects ‘other’ as the investor category this will bring about further information needed to be reported
• Advisers will be required to report cash separately from other categories when reporting assets and portfolio information concerning repo collateral
• Advisers will need to provide the clearing information for repos
• The amendments require advisers to report the total gross subscriptions and total gross redemptions for each month within the reporting period in question
• There is a change to the definition of the calculation of weighted average maturity and weighted average life

Amendments for all private fund advisers

The forthcoming amendments adopted in February 2024 make significant changes to the instructions applicable to all Form PF filers. We have picked out the key changes that we anticipate having the greatest impact on the private fund advisers we work with.

Disaggregation of fund structures 

Going forward advisers will not have the option to report certain fund structures on an aggregate basis. The amendments will require separate reporting for each component fund of a master-feeder arrangement and parallel fund structure as opposed to the flexible format that advisers can currently apply. Disaggregation does not apply in all circumstances, for example a feeder fund that invests all of its assets in the master fund can be disregarded. 

Investment in other private funds

Private fund advisers will no longer have the option to include or exclude fund of fund investments on their Form PF return. The amendment to the instruction requires advisers to include the investment in other private funds, this is likely to substantially increase the scope and quantity of private fund advisers that will need to file Form PF in the future. 

Gross Asset Value (GAV) and Net Asset Value (NAV)

The final amendments require large hedge funds and large liquidity funds to report the GAV and NAV values at the end of each month within the reporting period. The rules do allow for some leniency over the method used to calculate the value that is reported specifically for private fund advisers who would not normally calculate these values on a monthly basis. 

Trading vehicles

The final rules require advisers to identify trading vehicles, this would include any separate legal entity that is wholly or partially owned by the fund if that vehicle contains assets, conducts activities for the purpose of the funds trading activities or incurs leverage. Going forward advisers will need to do a look through to the instruments held within the Trading Vehicles for the purposes of reporting, however the values reported can be adjusted for the funds relevant percentage ownership of the trading vehicle.

To conclude, it is evident that the amendments continue to transform Form PF into a reporting tool for the SEC to collect more intrusive information on private fund advisers. Having worked with a number of private fund advisers on understanding the amendments we know first-hand that the devil is in the detail. It is critical for advisers to do the work and have the processes in place ahead of the compliance dates to ensure they are meeting and will continue to meet the regulators expectations.

If the new reporting requirements are starting to become a daunting process or if you would like to have a better understanding of the application of the amendments and the impact on your firm, fill in the form below and we’ll be in touch.